Soros on The Credit Crisis of 2008

“The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means” (George Soros)

Quite enjoyed the clarity of the discussion between Bill Moyers and George Soros. I don’t have the training or experience to have an informed opinion as to what they actually said, but it sounded like sense.

In his new book, THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS, George Soros explains the credit crisis through the lens of his conception of financial markets and human affairs, a theory he calls “reflexivity.” What we are seeing, according to Soros, is not just the deflation of the housing bubble, but that of a much bigger “super-bubble” twenty-five years in the making. Based on too much credit and too little regulation, the super-bubble has supported an unsustainable world order, where the United States consumes more than it produces.
In his interview with Bill Moyers, Soros lays out several short-term prescriptions for dealing with the crisis, one of which — directly injecting cash into banks in exchange for a share of the company — was authorized in the $700 billion bailout, and is being considered by the US Treasury.

But along with stopping the slide into more dire financial straights, Soros also has a vision for a post super-bubble world. For Soros, this unraveling, though inevitable, need not cause too much despair. Consumption has been the motor of our economy for 25 years, he explains, and now that motor is gone. But we can create a new motor to deal with one of the main aspects of our over-consumption problem — energy. Combating global warming will require a huge amount of effort — the amount of change and development that can restart an economy. Soros goes on to explain:

I think we all have to consume less. We will consume less because we will have to. And rather than being unemployed, let’s keep employment up. We’d use it for dealing with global warming. That, I think, is the way that this could work in the right way.

[From Bill Moyers Journal . George Soros | PBS]

If you missed the broadcast, there is a streaming video at PBS.org, and transcript here.